Large numbers of Israeli security forces have been deployed in the West Bank after an Israeli settler was stabbed to death by a Palestinian amid fears that the killing could trigger widespread confrontations.

Eviatar Borovzky, 30, a father of five children and a part-time security guard at the hardline settlement of Yitzhar, near Nablus, died of his wounds at the scene of the attack. His assailant snatched the settler's gun and shot at nearby border police. They returned fire, wounding the Palestinian, who was detained and taken to hospital in Israel.

Confrontations between militant settlers and Israeli security forces in the West Bank were reported following the attack. Two Palestinian school buses were stoned by settlers, while others set fire to tyres and olive groves, the Palestinian official Ghassan Daghlas told the news agency Ma'an.

Around the same time, an Israeli air strike killed an alleged Palestinian militant in Gaza in the first targeted assassination since the eight-day war last November. The Israeli Defence Forces (IDF) said Haitham Masshal, 24, had been involved in a recent rocket attack on the Israeli Red Sea resort of Eilat. It described him as a "Global-Jihad-affiliated terrorist" and said he had "acted in different Jihad Salafi terror organisations and over the past few years has been a key terror figure".

The renewed violence is likely to dismay the US secretary of state, John Kerry, who has embarked on a drive to get the Israelis and Palestinians back to the negotiating table after four years without face-to-face talks. Kerry has visited the region three times in recent weeks in an effort to broker confidence-building measures, which are seen as a necessary precursor to renewed negotiations.

Borovzky was reportedly stabbed three times, at least once in the chest, in the attack early on Tuesday morning at a bus stop at the Tapuach junction, near Nablus‚ a tense spot where settlers congregate to catch buses or hitchhike.

Palestinian "services", or shared taxis, are banned from stopping at the junction.

Following Tuesday's attack, Yariv Levin, the chairman of Israel's governing coalition, said it was "the Palestinian response to John Kerry's new peace initiatives". Avi Roeh, of the Yesha Council, which represent settlers, said that "history proves that talk of concessions is the biggest producer of terror attack".

Borovzky is the first Israeli to be killed by Palestinians in the West Bank since September 2011, when Asher Palmer, 25, and his baby son died after a rock was thrown at their car. Six months earlier, five members of the Fogel family were stabbed to death in their home in the settlement of Itamar.

2012 was the first year that no Israelis were killed in the West Bank, according to the Israeli internal security service, Shin Bet.

Since the beginning of this year, nine Palestinians have been killed by Israeli forces in the West Bank. Israeli security analysts have warned repeatedly of mounting tension in the area which, they say, could lead to renewed violence.

In Gaza, Masshal was riding a motorcycle when he was targeted by an Israeli plane at around 10am. "A direct hit was confirmed," said a statement from the IDF. It added that Masshal had worked with "all of the terror organisations in the Gaza Strip. He manufactured, improved and traded different types of ammunition, specialising in rockets and explosive devices, which he sold to terror organisations."

The attack on Eilat on 17 April involved two rockets fired from the Egyptian Sinai. One, which landed in a residential area, caused minor damage. The Israeli prime minister, Binyamin Netanyahu, said the attack was the work of "a terrorist cell that left Gaza and used Sinai in order to attack an Israeli city".

He added: "This is unacceptable. We will exact a price for this; this has been our consistent policy for the past four years and it will serve us here as well."

Hamas, the Islamist organisation which controls Gaza, has observed the ceasefire agreement that ended November's conflict. However, in the past two months there has been renewed intermittent rocket fire from Gaza into Israel, blamed on small extremist organisations that Hamas is trying to rein in.

"There are no more than 10 guys involved [in firing rockets from Gaza]," Ihab al-Ghusain, head of the Hamas government's media office, told the Guardian in Gaza City this week. "Nobody accepts people doing things against the [ceasefire] agreement."

There is widespread expectation in Gaza that another military confrontation is inevitable. Many in Gaza say Israel has violated the terms of the ceasefire agreement by failing to open Gaza's borders.